I ditched corporate America in 1994 and started a management consulting and venture capital firm (http://petercohan.com). I started following stocks in 1981 when I was in grad school at MIT and started analyzing tech stocks as a guest on CNBC in 1998. I became a Forbes contributor in April 2011. My 11th book is "Hungry Start-up Strategy: Creating New Ventures with Limited Resources and Unlimited Vision" (http://goo.gl/ygaUV). I also teach business strategy and entrepreneurship at Babson College in Wellesley, Mass.

John Price Is Bringing Silicon Valley to Austin

John Price has traveled back and forth between Austin and Silicon Valley during his 30 years in high tech. And now he’s helping talking to Silicon Valley’s leading investors about Austin’s tax and labor cost advantages.

Moreover, the people he helped train at Trilogy in the 1990s are coming of age now to create a host of exciting tech companies in Austin — giving the Silicon Valley Start-up Common (SBSC) a run for its money.

The idea of the Common originated near an English village in a field where everyone brought their animals to graze.

If the community did not over-consume the grass and kept it fertilized and fresh, then it was a useful resource for generations. If a few farmers let their animals eat too much, the whole thing died and the community fell apart. That unpleasant outcome was dubbed the Tragedy of the Commons.

In Silicon Valley, there is a start-up common. Instead of grass, it consists of various ingredients – capital and skills like product development, managing teams, sales and marketing — needed for start-ups to get off the ground and grow. First-time entrepreneurs network to tap those ingredients and if they are successful, then they give back to the common to benefit the next generation of start-ups.

As he explained in a November 16 interview, Price graduated from the University of Texas, Austin with a degree in electrical engineering in 1982 and spent the next six years in R&D. This put him at the forefront of technology but shielded him from worrying about entrepreneurial concerns — such as getting customers and raising capital.

Price was then recruited by two French entrepreneurs in Silicon Valley who started an artificial intelligence company called Neuron Data. As Price explained, “One was a brilliant tech guy, and one was a brilliant business guy, and they just identified me in research, and I had no idea where I was going or what I was doing with it, they said, ‘You need to come do start-ups.’ So I went to Silicon Valley.”

In 1991, Price and a “bunch of Stanford kids” started a software company called Trilogy. Though its started in Silicon Valley, they moved to Austin because “we already could see the signs of how difficult it was going to be to build a start-up in the Silicon Valley where the competition for talent” was so fierce.

Trilogy reached about $15 million in sales in 1994 and Price was concerned that it couldn’t grow anymore because Austin lacked sufficient talent. So. Price started Trilogy University — a program to recruit top technology talent to Austin from around the country.

In the next five years, Trilogy invested millions to recruit ”over a thousand kids to Austin out of the top 20 technology programs in the U.S.” Trilogy reached about $250 million in sales with 40% margins and then fell apart after the dot-com bust. But because Trilogy’s CEO, Joe Liemandt, held on to much of the stock, those Trilogy workers did not become wealthy.

But they left Trilogy hungry and that hunger helped fuel them to start and take public two Austin-based companies — HomeAway (AWAY) and BazaarVoice (BV). And thanks to those IPOs, the Trilogy Alumni network finally has liquidity.

And thanks to that liquidity, they can invest in entrepreneurs they know. As Price said, “Hey, look. Josh Baer just put 50 grand in that company. I believe in Josh. I’m gonna throw 50 grand to that company. So it created an environment that now has liquidity and the networks to facilitate and expedite” start-ups.

Baer created an accelerator called, Capital Factory. It has 30 members who each invest $5,000 into a fund that picks five to 10 companies. Capital Factory houses these companies, provides them mentoring,” and when they graduate, they get funding if they have made sufficient progress with their business.

And Austin is starting to attract talent from California because it does not have a state income tax and it is culturally similar to California. As Price quipped, “Austin is the blue dot in a very big red state.”

He believes that the South by Southwest Interactive conference draws entrepreneurs to Austin. As Price explained, “Entrepreneurs love Austin because South by Southwest Interactive has become the only tech entrepreneur conference that matters.”

It remains to be seen whether Austin will rival Silicon Valley for technology activity but thanks to the efforts of people like Price, it is creating some of the critical elements for a vital start-up common.

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